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Affording a Down Payment

For first-time homebuyers, having a sufficient amount of money for affording a down payment can be difficult. It is predicted that due to the current wages, property prices, and savings rate of individuals, it takes approximately 12.5 years for someone to save the 20% down payment required. For someone who has wealthy family members or equity to help them out, the number of years could be reduced. This prediction is calculated based off of current home prices and wages, not any for the future.

Due to the difficulty of being accepted for a loan, there are many first-time homebuyers who will not even try. When attempting to make a 20% down payment, the amount of savings required is intimidating. This is especially true for millennials. In comparison to their predecessors, it takes a millennial four more years to have earned the national median salary. The workers from 1980 reached the median salary by the age of 26, while millennials reach it at the age of 30. This is due to a number of factors, including: the decline in blue-collar occupations, the housing crash, the aftermath of 9/11, and going through both the Iraq and Afghanistan wars.

Another large factor contributing to the difficulty of first-time homebuyers making a down payment is loans. A down payment of 20% is a massive obstacle when an individual is still making payments for college and a car. As the national average for student debt is $30,000, finishing student loan payments takes years to accomplish.

Through the Federal Housing Administration (FHA), first time homebuyers will be able to receive a mortgage more easily. The FHA enables homebuyers to pay low down payments, closing costs, and qualify for credit more easily. The lowest down payment they provide is 3.5%. The low down payment comes with a 3.75% 30-year fixed rate, but the higher down payment made, the better the terms. The FHA is trying to make the seemingly impossible scenario into a much more possible and affordable situation.

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